Numerical Analysis of Asymmetric First Price Auctions
AbstractWe develop a powerful and user-friendly program for numerically solving first price auction problems where an arbitrary number of bidders draw independent valuations from heterogenous distributions and the auctioneer imposes a reserve price for the object. The heterogeneity in this model arises both from the specification of ex-ante heterogenous, non-uniform distributions of private values for bidders, as well as the possibility of subsets of these bidders colluding. The technique extends the work of Marshall, Meurer, Richard, and Stromquist (1994), where they applied backward recursive Taylor series expansion techniques to solve two-player asymmetric first price auctions under uniform distributions. The algorithm is also used to numerically investigate whether revenue equivalence between first price and second price auctions in symmetric models extend to the asymmetric case. In particular, we simulate the model under various environments and find evidence that under the assumption of first order stochastic dominance, the first price auction generates higher expected revenue to the seller, while the second price auction is more susceptible to collusive activities. However, when the assumption of first order stochastic dominance is relaxed, and the distributions of private values cross once, the evidence suggests that the second price auction may in some cases generate higher expected revenue to the seller
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 472.
Date of creation: 11 Nov 2005
Date of revision:
Asymetric; Optimal Reserve; Ex-ante Heterogeneity;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven A. Matthews, 1981.
"Selling to Risk Averse Buyers with Unobservable Tastes,"
480S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August.
- Paul Milgrom & Robert J. Weber, 1981.
"A Theory of Auctions and Competitive Bidding,"
447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Maskin, Eric S & Riley, John G, 1984.
"Optimal Auctions with Risk Averse Buyers,"
Econometric Society, vol. 52(6), pages 1473-1518, November.
- John G. Riley & William Samuelson, 1979.
UCLA Economics Working Papers
152, UCLA Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.